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Central bankers say Fed not going 'loco' as Trump sounds off

Oct 11 2018 13:57
Yuko Takeo, Bloomberg

Central bankers from around the world jumped to the US Federal Reserve’s defence after President Donald Trump accused the central bank of going “loco”.

Trump on Wednesday slammed the Fed as “going loco” for its interest-rate increases this year in comments hours after the worst US stock market sell-off since February. Earlier in the day, Trump said the central bank “has gone crazy”.

During panel discussions at the International Monetary Fund’s annual meetings in Bali, Indonesia on Thursday, Reserve Bank Governor Lesetja Kganyago stressed the importance of central bank independence when he was asked whether Trump’s comments demean the integrity of the institutions.

“Regulators need to be given the space to act independently, without continuous political interference,” said Kganyago.

“We need to be given that space, and if we are to promote innovation within the confines of our mandates, we need to have that space.”

Bank of England Governor Mark Carney also joined in, saying, “I think the sanest way to answer that question is to associate myself entirely with Lesetja’s answer.”

Carney also praised Fed chairperson Jerome Powell’s technocratic expertise.

“He is an individual that really understands the plumbing of the US and global financial systems and one example is the reforms that are going underway on Libor for which he is one of the main sponsors,” said Carney.

“That’s an incredible advantage for the system at a time when the system is changing so rapidly.”

Earlier in the day, IMF Managing Director Christine Lagarde also stuck up for Powell during an interview with CNBC.

“I would not associate Jay Powell with craziness,” she said. “No, no, he comes across, and members of his board, as extremely serious, solid and certainly keen to base their decisions on actual information and decide to communicate that properly.”

Trump has been publicly criticising the Federal Reserve - led by chairperson Jerome Powell, whom he appointed - since July for interest-rate increases and declared he was “not happy” in September after the third rate hike of the year.

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